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Suitability letter builder

In giving your clients advice, you will have carefully considered their personal and financial circumstances, financial needs, priorities and risk profile. These factors will determine what recommendations you make.

We have provided the following paragraphs to help you create suitability letters for your clients. Suitability letters must be personalised and specific to individual clients. These paragraphs are designed to help you substantiate your recommendation of the Flexible Guarantee Bond Series 3. They are not intended to form the whole of the suitability letter

Please note that, before using these paragraphs, or similar text, you must ensure compliance from your own compliance department to use these paragraphs, and with the appropriate regulations. Whilst every care has been taken to ensure the accuracy of this information, LV= cannot accept liability resulting from its use.

These paragraphs are suitable for UK residents only.

Create a suitability letter

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I've considered the most appropriate place for you to invest from the range available to me and I think that investing £[x] into the Flexible Guarantee Bond Series 3 from LV= is the most suitable.

This bond offers three funds to choose from. In your case the fund that's the closest match to your objectives and fits best with your attitude to risk is the

Cautious Series 2 Fund.

This fund is designed to provide long term steady growth together with a low level of investment risk. The Fund invests, either directly or indirectly, in a diversified portfolio of fixed interest securities, equities, property, cash and other related instruments. The fund aims to avoid sharp rises and falls by “averaging” the investment return over a rolling 26 week period.

Balanced Series 2 Fund.

This fund is designed to provide long term moderate growth together with a low to medium level of investment risk. The Fund invests, either directly or indirectly, in a diversified portfolio of fixed interest securities, equities, property, cash and other related instruments. The fund aims to avoid sharp rises and falls by “averaging” the investment return over a rolling 26 week period.

Managed Growth Fund.

This fund is designed to provide long term growth together with a medium level of investment risk. The Fund invests, either directly or indirectly, in a diversified portfolio of fixed interest securities, equities, property, cash and other related instruments. The fund aims to avoid sharp rises and falls by “averaging” the investment return over a rolling 26 week period.

The fund uses averaging to help provide stability over time. If you have been invested in the fund option for 26 weeks or more, LV= helps protect your investment from short term ups and downs by averaging the value of the assets over the previous 26 weeks.

One effect of averaging means that if the markets are rising when you cash in all or part of your investment, you may get back less than if you were invested directly in the assets. But if markets are falling, you may get back more.

In certain circumstances, LV= may choose to suspend averaging, and when this happens, the underlying price will apply to your investment instead. LV= will only do this if they believe this action is required to protect the with-profits funds, or if it is in the best interests of LV= with-profits members generally. Payments will revert back to the Averaged Price when the Society considers it appropriate and fair to members.

You can switch fund options at any time. Three switches are free in any bond year and then a £25 charge will be applied to further switches. If you choose to switch between funds, LV= will wait 10 working days from the date they receive your instruction before they make the change to your investment. Once you’ve asked to switch funds, you can’t change your mind.

The bond has a range of guarantee terms available. By choosing the guarantee option, LV= guarantee that the value of your bond at the end of the selected guarantee term, will be at least the same as the value of your bond on the date you added it, less any money paid out during the guarantee term (which includes any withdrawals you make and any on-going and ad-hoc adviser charges).

The use of the guarantee is flexible as you can buy it at outset or at any time after. This includes allowing you to buy a new guarantee in order to lock-in any growth achieved even during an existing guarantee term (subject to an admin charge if renewing within the same bond year of any previous guarantee starting).

The guarantee applies at the end of the guarantee term and LV= automatically add units to make up any shortfall. Please note that you could also still get back less than you invested if you cash in the bond before the end of the guarantee period or after.

In your case,

A) I'm recommending that you include a [insert guarantee term] year guarantee from the start in order to meet your objectives.

The cost of the guarantee is shown later in this letter with the other bond charges.

B) I'm recommending that you initially exclude the guarantee because [insert reasoning].

I'm recommending that you initially exclude the guarantee because [insert reasoning].

As a mutual, LV= has discretion to apply a mutual bonus to Flexible Guarantee Bond Series 3. However, it’s unlikely that LV= will pay a mutual bonus, particularly in the early years of your investment, and I do not expect any mutual bonus to be paid on your investment. Mutual bonus is declared annually, at the complete discretion of the LV= board, and is not guaranteed. The Bond Conditions explain how any mutual bonus would apply to your Bond.

The death benefit payable will be 101% of the value of the fund. In your case,

Select from the following paragraphs as appropriate

A) As your Bond is to be invested on a single life basis, this death benefit will be paid out if the life insured dies.

B)As your Bond is to be invested on a joint life first death basis, this death benefit will be paid out if one of the lives assured dies.

C) As your Bond is to be invested on a joint life second death basis, this death benefit will only be paid out if both of the lives assured die.

Withdrawals of up to 5% of your initial investment amount can be taken from the bond each year for a period of 20 years, without incurring an immediate tax liability. This withdrawal allowance is cumulative. For example, if no withdrawals were paid in year 1 or year 2, up to 15% of the initial investment amount can be withdrawn in year 3 without incurring an immediate tax liability.

If your withdrawals exceed this allowance, or if you cash in the bond, you may have to pay higher rate tax on any gains made. This will only happen if you are a higher rate taxpayer at the time of the withdrawal or encashment, or if you become a higher rate taxpayer as a result of gains made on the bond.

You have decided not to take regular withdrawals from your bond at this time. You may change your mind in the future. The bond allows you to start taking regular withdrawals at any time every month, 3 months, 6 months or a year from a minimum amount of £50.

On-going adviser charges and Ad-Hoc adviser charges

Please note that any adviser charge will be treated as a withdrawal from your bond for tax purposes and count towards your 5% allowance. Ad-hoc adviser charges will be subject to the same waiting period as described above.

You can take occasional withdrawals from the bond in future. The minimum amount that can be withdrawn starts from £250.

In certain circumstances, LV= may apply a waiting period of up to 10 working days before they pay any ad hoc withdrawals from your Bond. LV= will only do this if they believe this action is required to protect the with-profits funds, or if it is in the best interests of LV= with-profits members generally. If a waiting period is to apply to

On-going adviser charges and Ad-Hoc adviser charges

Please note that any adviser charge will be treated as a withdrawal from your bond for tax purposes and count towards your 5% allowance. Ad-hoc adviser charges will be subject to the same waiting period as described above.

You are applying for the bond in conjunction with a <insert type of trust>.

<State reasons why trust recommended>

LV= offers trusts that may be used for inheritance tax planning. If appropriate you could put your bond into either a Gift or Loan trust. <State reasons why trust recommended>

I'd like to show you the charges associated with the bond.

Monthly management charge:

This is based on the value of the bond (including any mutual bonus) at the time each charge is taken:

Fund value (including any mutual bonus)

Monthly management charge (annual equivalent shown in brackets)

Below £25,000

0.086% (1.050%)

£25,000 to £49,999.99

0.081% (0.975%)

£50,000 to £99,999.99

0.075% (0.900%)

£100,000 to £249,999,99

0.071% (0.850%)

£250,000 and over

0.069% (0.825%)

The details of any initial and on-going adviser charges to be paid to [XYZ Ltd] are shown in your personal illustration. Any initial adviser charge will be paid before the remainder is invested in the bond. <Any on-going adviser charges will be paid by taking withdrawals from the bond>.

LV= will apply a discount to your monthly management charge in future years. The size of the discount will depend on how long your money has been invested in the Bond. The table below confirms the discount:

Duration (whole years)

Loyalty discount (pa)

0-4

0.00%

5-9

0.05%

10-14

0.10%

15-19

0.20%

20+

0.25%

The bond has a range of guarantee terms available. By choosing the guarantee option, LV= guarantee that the value of your bond at the end of the selected guarantee term, will be at least the same as the value of your bond on the date you added it, less any money paid out during the guarantee term (which includes any withdrawals you make and any on-going and ad-hoc adviser charges).

The use of the guarantee is flexible as you can buy it at outset or at any time after. This includes allowing you to buy a new guarantee in order to lock-in any growth achieved even during an existing guarantee term (subject to an admin charge if renewing within the same bond year of any previous guarantee starting).

The guarantee applies at the end of the guarantee term and LV= automatically add units to make up any shortfall. Please note that you could also still get back less than you invested if you cash in the bond before the end of the guarantee period or after.

In your case,

The bond meets your objectives in that:

[delete as appropriate]

• it invests in a broad spread of investments and markets. This represents an efficient way to invest and manage risk

• there's a chance of beating inflation and earning real returns over the long term.

• you intend to stay invested for at least five years (and ideally longer)

• it gives you the option to buy a capital guarantee at any time to help protect your investment

• it fits well with your personal tax situation as a basic/higher/additional rate taxpayer

­ Basic Rate Taxpayer – basic rate tax is accounted for within the fund, so there is no further tax to pay.

­ Higher or Additional Rate Taxpayer – income is retained in the bond, therefore no income tax whilst invested.

• you expect to be a basic rate tax payer when you encash the bond.

­ However, if you end the bond, or more than 5% of the amount invested is paid out in one year, whilst you are a higher or additional rate tax payer, you will be liable to tax at 20% or 25% on any gains made.

­ Non Taxpayer – Normally this product is not recommended for non-taxpayers as basic rate tax cannot be reclaimed as it is paid at source. However in your circumstances [Insert your customers circumstance and reasoning's. An example: You expect to be a basic rate tax payer within the next 3 months.]

• it's complementary to your existing investments.

• it has [insert asset and geographic preferences that match].

• it's less/more/the same risk as you have taken before.

• the charging is transparent so you can see what charges will be applied to your investment.

• It has a smoothing mechanism which helps protect your investment from short-term volatility in the market, giving a more consistent return.

• It has withdrawal options to match your changing needs.

• It can be put into trust to help with Inheritance Tax Planning.

• It can be assigned.

• anything else that's customer specific.

LV= background – trading name

LV= is a registered trademark of Liverpool Victoria Friendly Society Limited and a trading style of the Liverpool Victoria group of companies.

LV= background - foundation

LV= is committed to mutuality and believes that remaining mutual has a vital part to play in its ability to continue to provide members with a better future.

Liverpool Victoria Friendly Society Limited was founded in 1843 to help people on low incomes maintain a basic standard of living for their families and save for a decent funeral. The aim of the Society was to make financial security and peace of mind available to more than just the privileged few – an ambition that still holds true today. In 2007 Liverpool Victoria rebranded as LV=. LV= is proud to be a 'Society of Equals' wholly owned by its members – unlike most PLCs, where institutional shareholders have the biggest say.

Mutuality

Liverpool Victoria Friendly Society Limited does not have any shareholders and, as a mutual organisation, exists wholly for the benefit of its members. Together with its subsidiary companies, the Society is an insurance and financial services business in the United Kingdom.

Size

Liverpool Victoria Friendly Society Limited is the UK's largest friendly society and heads the Liverpool Victoria group of companies. LV= employs over 6,000 people, and serves 5.8 million customers and members.

All three funds are part of the main LV= with-profits fund which is rated 10/10 for financial strength, investment freedom, and flexibility and bonus-paying ability (Source: Cazalet Consulting With Profits Ratings, July 2014)

Mutual Bonus

There is the potential for a mutual bonus. This is declared annually, at the complete discretion of the LV= board, and is not guaranteed.

Member Discounts

All members of LV= qualify for discounts of up to 10% (on regular non-member rates) on a range of their general insurance products including car and home insurance.

Members also have access to LV=’s Member Care Line which offers free access to confidential advice and support from qualified professionals 24 hours a day, 7 days a week, including health, medical and lifestyle questions, counseling and help with legal questions and disputes.

Stock Market:

The value of investments can fall as well as rise.

The fund value fluctuates every day.

This is a stock market related investment so you aren't certain to make a profit and you may get back less than you invested.

Withdrawals:

If withdrawals are paid out of the bond, this will eat into your original investment if the amount is more than the growth on the bond.

You will not have to pay any capital gains tax or basic rate income tax on money you take out of the bond. LV= has already paid tax on income and gains, which cannot be reclaimed by you, even if you are a non-taxpayer.

Tax:

How much tax you pay depends on your personal circumstances. For details of how benefits from your bond will be taxed, please see the Key Features document. Any references to taxation are based on my understanding of current legislation and HM Revenue and Customs practice, both of which can change.

Taxation will depend on your personal circumstances and tax rules are subject to change.

Other:

You should read the full details in the Key Features Document before deciding to invest.

About our suitability letter builder

A good suitability letter is:

your opportunity to justify and reinforce the reasons for your advice and recommendations

an excellent opportunity to document unmet and future needs and the importance of on-going review discussions

your record of the discussions held and the recommendations made/not made and why.

It should be clear, fair and not misleading. It should be personal, explain the reasons why a recommendation has been made and how it meets the customers’ needs and objectives. It should highlight any risks involved.

We’ve produced a range of template paragraphs that are designed to describe generic features of each type of policy, as well as the specific benefits of our own products. You can use and adapt these paragraphs to help construct your own Suitability Letters.

LV= has taken care to ensure the accuracy of the information at the time of issue but does not accept liability resulting from your use of it.